Sales for the phone will skyrocket initially. However, things will calm down, and the Apple phone will take its place on the shelves with the random video cameras, cell phones, wireless routers and other would-be hits. Remember the Mac Mini? It was supposed to ignite a revolution for small computers. It didn’t. The flat-panel iMac? Some predicted that Apple’s price tag would drive other prices higher. Whoops. Why won’t the Apple phone succeed? It will be a great piece of hardware that, if I wasn’t the cheapest man in North America, I might buy. The entire strategy, however, is based on what I call “iPod magic.” Apple succeeded with the iPod, the theory goes. Therefore, they can break into other categories and turn them upside down.

I’m more convinced than ever that, after an initial frenzy of publicity and sales to early adopters, iPhone sales will be unspectacular. If Apple doesn’t respond quickly by lowering the price and making nice to AT&T, which surely will be ticked off, iPhone may well become Apple’s next Newton. Remember that two years after Newton was introduced, a smaller, cheaper PDA appeared — the Palm Pilot — which truly did rock the world.

Apple will launch a mobile phone in January, and it will become available during 2007. It will be a lovely bit of kit, a pleasure to behold, and its limited functionality will be easy to access and use. The Apple phone will be exclusive to one of the major networks in each territory and some customers will switch networks just to get it, but not as many as had been hoped. As customers start to realise that the competition offers better functionality at a lower price, by negotiating a better subsidy, sales will stagnate. After a year a new version will be launched, but it will lack the innovation of the first and quickly vanish.

It’s the loyalists who keep promoting this device as if it is going to be anything other than another phone in a crowded market. And it’s exactly the crowded-market aspect of this that analysts seem to be ignoring. . .

Now compare that effort and overlay the mobile handset business. This is not an emerging business. In fact it’s gone so far that it’s in the process of consolidation with probably two players dominating everything, Nokia Corp and Motorola Inc. During this phase of a market margins are incredibly thin so that the small fry cannot compete without losing a lot of money. . .

There is no likelihood that Apple can be successful in a business this competitive. Even in the business where it is a clear pioneer, the personal computer, it had to compete with Microsoft and can only sustain a 5 percent market share.

There’s no chance that the iPhone is going to get any significant market share. No chance. It’s a $500 subsidized item. They may make a lot of money. But if you actually take a look at the 1.3 billion phones that get sold, I’d prefer to have our software in 60% or 70% or 80% of them, than I would to have 2% or 3%, which is what Apple might get.

I have three specific reasons why the iPhone’s design will cause it to crash in flames the way Apple’s late and unlamented Newton did, only much more loudly and publicly because of all the hype it’s gotten:

First, the iPhone ignores the main reasons that the iPod succeeded: simplicity and ease of use. . . . .

Second, the iPhone crams too many functions into a single box. Putting everything in the same package so you only have to carry one box sounds like a good idea, until you want to listen to music while surfing the web or reading your email or playing a game. . . . .

Third, users will detest the touch screen interface due to its lack of tactile feedback. . . . .